Didn’t we expect this?

The government is not an effective administrator of loans because borrowers have a tendency to believe that borrowers are “entitled” to *not* re-pay the loan. This is discussed in more detail in a previous article explaining why government should leave loans administration to private or semi-private companies.

The article below and the comments in bold (emphasis by this writer) explain in more concrete terms why the loan scheme isn’t working.

MANILA, Philippines – The Overseas Workers Welfare Administration (OWWA) incurred losses of about P70 million in pre-departure loans extended to overseas Filipino workers (OFWs).

Labor Secretary Marianito Roque on Sunday said he decided to suspend the said OWWA assistance after the OFWs failed to pay their loans.

“I decided to suspend it kasi nga puro utang walang nagbabayad, so nalulugi kami (I decided to suspend it because nobody’s paying and we’re incurring losses),” Roque said in a telephone interview.

Roque said the OWWA allocated P100 million for the pre-departure loan program. However, he stopped the program when loans that were largely unpaid reached P70 million.

“Ang naipautang na namin is P70 million, pero ang nagbayad lang is 30 percent, so how can we survive? (We have lent P70 million, but only 30 percent of the borrowers have so far paid, so how can we survive)?” he said

He said the OWWA also asked the borrowers’ co-makers to pay for the loans. However, the agency failed to collect money from them, and instead heard some OFWs saying that they would no longer pay their debts because they already paid the OWWA a $25-membership fee on a per contract basis.

“Ang sabi nila pera din naman daw ‘yan ng OFWs, kinokolekta sa kanila yung $25 kaya bakit pa sila magbabayad (The OFWs asked why would they have to pay for the loans when they had already paid $25), ” said Roque.

“Historically sa OWWA ‘yan ang problema, ang sama ng payment rate, (Historically, that’s the problem at OWWA, payment rate is poor), ” he added.

‘Nuf said.

Read full story on GMANEws.TV: OWWA loses P70M in loans, stops aid to OFWs >>

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